A simulation of the impacts of dynamic price management for perishable foods on retailer performance in the presence of need-driven purchasing consumers

Jaekwon Chung and Dong Li
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Jaekwon Chung: Kookmin University, Seoul, South Korea
Dong Li: University of Liverpool, Liverpool, UK

Journal of the Operational Research Society, 2014, vol. 65, issue 8, 1177-1188

Abstract: Numerous studies have investigated dynamic pricing for perishable products. The models have been designed to determine an optimal pricing structure and improve retailer performance. Previous studies on pricing models for perishable products have considered various assumptions of consumer demand and purchasing behaviour from deterministic and stochastic price-dependent demands to myopic and strategic consumer purchasing behaviour. They have not, however, considered consumer demand in reaction to a situation where the display stock of a particular product has different qualities (such as shelf-life) and prices available at the same time. This is particularly applicable in the analysis of dynamic pricing models for perishable foods. In this paper, we investigate the impact of frequency of discount during a product’s selling period on retailer performance, by considering changes in consumer purchasing behaviour in response to the display stock of a particular food product having different remaining shelf-life and prices. On the basis of a literature review and data obtained from interviews with food retailers, a simulation study is performed to compare the performance of different pricing policies. The results demonstrate the benefits gained by adopting more dynamic price policies.

Date: 2014
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